IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT :
THE HONOURABLE MR. JUSTICE S.SIRI JAGAN
TUESDAY, THE 28TH OCTOBER 2008 / 6TH KARTHIKA 1930
OP.No. 17587 of 1999(R)
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PETITIONER(S):
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THE CATHOLIC SYRIAN BANK LTD., ST. MARYS' COLLEGE ROAD, THRISSUR-20 REP. BY ITS CHAIRMAN.
BY ADV. SRI.B.S.KRISHNAN (SR.)
RESPONDENT(S):
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1. SRI. M.P. LAZAR, 2/32, MANACHERY, THRISSUR-5.
2. THE REGIONAL LABOUR cOMMISSIONER (C), 39/1239, KALATHIPARAMBIL ROAD, ERNAKULAM, KOCHI-18.
ADV. SRI.S.V.BALAKRISHNA IYER (SR.) SRI.P.B.KRISHNAN
THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 21/10/2008, THE COURT, ON 28/10/2008, DELIVERED THE FOLLOWING:
PETITIONER'S EXHIBITS: O.P.NO. 17587/1999. -----------------------------------------------------------------
EXT.P1 TRUE COPY OF SETTLEMENT DT. 23-6-1995. EXT.P2 ORDER DT. 2-9-1997. EXT.P3 ORDER OF APPELLATE AUTHORITY.
[TRUE COPY]
P.S TO JUDGE.
## S. Siri Jagan, J.
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O.P.No. 17587 of 1999
=-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-= Dated this, the 28[th] October, 2008.
## J U D G M E N T
The petitioner is a Bank and the employer in a gratuity claim filed by first respondent, who is a retired employee of the bank. They are challenging Ext.P2 order of the Controlling Authority under the Payment of Gratuity Act, directing the petitioner to pay to the 1[st] respondent, additional amount of Rs. 17,921/- as gratuity short paid to him and Ext.P3 order of the Appellate Authority confirming the order of the Controlling Authority. The short facts necessary for disposal of this original petition may be summarised as under:
2. The 1[st] respondent retired from service on 30.9.1994. After his retirement, by Ext.P1 settlement entered into in 1995, the Bank agreed to give its employees some benefits which included revision of salary with retrospective effect from 1.7.1993. At the time of retirement, the salary reckoned for the purpose of gratuity to the 1[st] respondent was Rs.10,109.40, based on which the 1[st] respondent was paid Rs.1,51,641/- as gratuity. As a result of the retrospective pay revision, the last drawn salary of the 1[st] respondent was increased to Rs.11,304.11. The 1[st] respondent filed G.C.No.34 of 96 before the Controlling Authority claiming difference in gratuity. The
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petitioner took the contention that in Ext.P1 settlement it was specifically stipulated in clause 15(iv) thereof that arrears of gratuity will be effective only with effect from 1.11.1994 and since the petitioner retired on 30.9.1994, he is not entitled to any arrears of gratuity based on the revised salary in view of the said clause in Ext. P1. Overruling the said objection, placing reliance on Section 14 of the Payment of Gratuity Act, by Ext.P2, the controlling authority directed the petitioner to pay to the 1[st] respondent an additional amount of Rs.17,921/- as gratuity. The petitioner's appeal against Ext.P2 was rejected by Ext.P3. Exts.P2 and P3 are under challenge in this original petition.
3. The contention of the petitioner is that at the relevant time, the maximum amount of gratuity payable under the Payment of Gratuity Act was Rs. 1 lakh. However, as per the service rules applicable to the officers of the Bank, gratuity was being paid at the rate of half months salary for every completed year of service, without any upper ceiling limit for the amount of gratuity. It is accordingly that the 1[st] respondent was paid Rs.1,51,641/as gratuity. Since payment of such better terms of gratuity was subject to the conditions in Ext.P1 settlement, the 1[st] respondent cannot claim any arrears of gratuity in derogation of Ext.P1. Counsel for the petitioner would further submit that Section 14 is not applicable in this case
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since the condition in Ext.P1 is not inconsistent with any provisions of the Payment of Gratuity Act in so far as going by the Act, the 1[st] respondent is entitled to a maximum gratuity of Rs.1.5 lakhs, more than which has been paid to the 1[st] respondent. The petitioner relies on the decision of the Supreme Court in **Beed District Central Co-operative Bank Ltd** . v. **State of Maharashtra** JT 2006 (9) SC 260 for the proposition that it is not open to an employee to opt for the best terms of both schemes but has to choose either the gratuity as per the Payment of Gratuity Act or that under the better terms of gratuity as per the Scheme of the employer, exclusively.
4. The 1[st] respondent disputes the contentions of the petitioner. According to him, as per the gratuity scheme applicable to the employees like the 1[st] respondent, he is entitled to gratuity as per the formula:
Last pay drawn Total no. of х years or service Gratuity payable = 2
subject to a maximum of 30 years' service. Section 4(5) of the Payment of Gratuity Act saves the right of an employee under any award or agreement or contract with the employer. The gratuity scheme as above is not amended by the Bank. On revision of pay with effect from 1.7.1993 his last drawn pay increases and therefore he is entitled to get gratuity on that enhanced last drawn pay, which right is saved by Section 4(5). The retrospective revision of pay is
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not conditional on payment of gratuity at the pre-revised last drawn pay. The right of the petitioner for better terms of gratuity as per the Gratuity scheme is also not conditional on the petitioner agreeing to accept gratuity at the pre-revised last drawn pay. Therefore, the condition in Ext.P1 that arrears of gratuity would be payable only with effect from 1.11.1994 is inconsistent with Section 4(5) of the Payment of Gratuity Act and therefore hit by Section 14 of the Act. On these contentions the counsel for the 1[st] respondent supports the impugned orders.
5. I have considered the rival contentions in detail.
6. What is posed before me is certainly an intricate question as to whether the condition in Ext.P1 restricting arrears of gratuity on the enhanced pay only with effect from 1.11.1994 is unenforceable in view of Section 14 of the Payment of Gratuity Act. It is settled law that beneficial legislations have to be interpreted in favour of the beneficiary of the legislation as far as possible. Going by the contentions raised, the exact terms of better terms of gratuity assumes importance in deciding the issue involved here. However, the petitioner has not chosen to produce the scheme by which the better terms of gratuity is paid to their employees. What is available is the one quoted in Ext.P2 order of the Controlling Authority, which has been extracted in paragraph 4 above. The petitioner has no case that, that scheme has been amended either by Ext.P1 or
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otherwise. Therefore, as per the gratuity scheme of the Bank, the 1[st] respondent has a right to get gratuity calculated on the basis of the last drawn pay, as revised by Ext.P1. That right is saved by Section 4(5). That right is also not conditional upon the terms in Ext.P1 regarding gratuity. Therefore, the term in Ext.P1 that arrears of gratuity is payable only with effect from 1.11.1994 is a fetter on the right of the 1[st] respondent to get better terms of gratuity under Section 4(5) in accordance with the Scheme. That being so, the condition in Ext.P1 that arrears of gratuity would be payable only with effect from 1.11.1994 is inconsistent with Section 4(5) of the Act and therefore hit by Section 14 of the Payment of Gratuity Act which provides as follows:-
“ **14. Act to override other enactments, etc.** - The provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act.”
That being so, the 1[st] respondent is entitled to get gratuity calculated as per the Gratuity Scheme of the Bank unfettered by that condition in Ext.P1, restricting arrears of gratuity on the revised pay only with effect form 1.11.1994.
7. The reliance placed by the counsel for the petitioner on the Supreme Court decision in **Beed District Central Co-operative Bank's case** (supra) appears to be inappropriate in the context. That decision only states that
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even while interpreting Payment of Gratuity Act beneficially, either the contract for better terms of gratuity or the Statute independently has to be given effect to and not the beneficial provisions of each taken together. The 1[st] respondent does not seek the best of both the statute and the Gratuity Scheme. He only seeks payment as per the Gratuity Scheme alone, which provides for calculation of Gratuity on the last drawn pay. When the pay is revised with effect from 1.7.1993, the 1[st] respondent's last drawn pay correspondingly increases and gratuity is liable to be re- computed on such enhanced last drawn pay in accordance with the service rules, which alone is sought to be enforced by the 1[st] respondent in terms of Section 4(5), which cannot be denied to him on the basis of the restrictive clause in Ext.P1 in so far as, if done so, it would be inconsistent with Section 4(5), in terms of Section 14 of the Act. The petitioner has not pleaded or proved before me that the Gratuity Scheme has been amended in tune with clause 15(iv) of Ext. P1, although he refers to clause 7, which mentions that the Service Regulations are proposed to be amended to deny arrears of gratuity in accordance with Ext. P1.
8. Perhaps a view that since both the Service Regulations containing the better terms of gratuity and Ext. P1 are as per settlements with unions, the 1[st] respondent cannot pick and choose clauses beneficial to him in Ext. P1
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and refuses to accept the clause which is not. But, when two views are possible, the one beneficial to the employee has to be adopted, which is the settled law in respect of beneficial legislations. Therefore, I am inclined to adopt the interpretation given by me as above in favour of the 1[st] respondent
9. I am taking such a strict view in the particular facts and circumstances of the case in so far as the amount directed to be paid is only Rs. 17,921/- and direction to pay such amount would not render the petitioner liable for similar payments to others at this point of time. Such direction will not have any effect on payment of gratuity to other employees also.
In view of the above findings, I am not inclined to interfere with the impugned orders in exercise of my discretionary jurisdiction under Article 226 of the Constitution of India. Therefore, the original petition is dismissed.
S. Siri Jagan, Judge.
Tds/
